Government proposes to introduce tiered charges for tax upon death

Wednesday 24 February 2016

In recent years the Probate Court Fee has been a flat fee of £155 if a solicitor submits the papers for every estate worth over £5,000 with 50p payable for every extra sealed copy of the court document the Executors need.

The Government proposes to increase these fees dramatically as follows so that the minimum fee for estates over £50,000 will be £300 increasing as follows.

Between £300,000 and £500,000 it will be £1,000

Between £500,000 and £1,000,000 it will be £4,000

Between £1,000,000 and £1,600,000 it will be £8,000

Between £1,600,000 and £2,000,000 it will be £12,000

Over £2,000,000 the fee will be £20,000

Whilst it might seem fairer to have a system of tiered charges, based on the value of the estate – and there will of course be those that say only the very wealthiest will bear these costs, have the practical issues such as access to cash prior to the grant of probate to enable these fees to be settled really been thought through?

This fee has to be paid before the Executors can access the deceased’s funds. It is hoped that banks etc. will let the deceased’s money be used to meet these costs; if not or, as may well be the case if the deceased merely had a valuable house, there is insufficient cash, the Executors will have to borrow. Where a solicitor is used to apply for the grant of probate, it is quite common for Solicitors’ to 'front' the probate fees, recovering them as soon as the Grant of probate has been received. That is highly unlikely to continue to be possible with fees of up to £20,000. Lending money to fund the probate process could prove to be a very difficult course of action in the current climate. In the past the banks would often charge a fee as well as interest for allowing an Executors’ loan.

The Government does not propose any reliefs or remissions.

It is only a few years since the Government introduced the flat fee arguing that the Probate service was not meant to make a profit but merely break even. The Government does not explain what has changed – only to say it needs more money for IT changes.

For many this increase will be a very significant tax at what is already a very stressful time.

When won’t the charge apply?

If the asset is not in the name of the deceased when they die the tax will not be due. One option is to put in the asset in the names of “bare trustees”/nominees. In this way you still own the asset for all purposes but it can be transferred without the need for probate on death. You will need to choose your nominees very carefully and this planning should only be considered in the context of your wider plans and objectives. Any outright gift or more complex trust will have immediate tax implications as well as risk other issues.

The transfer may trigger other charges but they should not be as steep as the “Probate Tax”.

In all the action to remove defective cladding, leaseholders have been the elephant in the room. Whilst social landlords might have adopted a wait and see approach private landlords do not have that luxury.